Hostess, the maker of Twinkies, announced Friday it would be going out of business. (Source: Hostess/CNN)

By CANDICE CHOI and TOM MURPHY
Associated Press
NEW YORK (AP) - Twinkies may not last forever after all.

Hostess Brands Inc., the maker of the spongy snack with a mysterious cream filling, said Friday it would shutter is operations after years of struggling with management turmoil, rising labor costs, intensifying competition and America's move toward eating healthier snacks even as its pantry of sugary dessert cakes seemed suspended in time.

Some of Hostess beloved brands such as Ding Dongs and Ho Ho's likely will be snapped up by buyers and find a second life, but for now the company says its snack cakes should be on shelves for another week or so. The news stoked an outpouring of nostalgia around kitchen tables, water coolers and online people relived childhood memories of their favorite Hostess goodies.

Customer streamed into the Wonder Hostess Bakery Outlet in a strip mall on the west side of Indianapolis Friday afternoon after they heard about the company's demise. Charles Selke, 42, pulled a pack of Zingers raspberry-flavored dessert cakes out of a plastic bag stuffed with treats as he left the store.

"How do these just disappear from your life?" he asked. "That's just not right, man. I'm loyal, I love these things, and I'm diabetic."

After hearing the news on the radio Friday morning, Samantha Caldwell of Chicago took a detour on her way to work to stop at a CVS store for a package of Twinkies to have with her morning tea and got one for her 4-year-old son as well.

"This way he can say, 'I had 1 of those,'" Caldwell, 41, said.

It's a sober end to a storied company. Hostess, whose roster of brands dates as far back as 1888, hadn't invested heavily in marketing or innovation in recent years as it struggled with debt and management changes.

As larger competitors insupermarket shelves with a dizzying array of new snacks and variations on popular brands, Hostess cakes seemed caught in time. The company took small stabs at keeping up with Americans' movement toward healthier foods, such as the introduction of its 100-calorie packs of cupcakes. But the efforts did little to change its image as a purveyor of empty calories with a seemingly unlimited shelf life.

Even taking into account changing tastes and competition, Hostess' problems were ultimately rooted in its own financials. The company, based in Irving, Texas, had been saddled with high pension, wage and medical costs related to its unionized workforce. It was making its second trip through bankruptcy court in less than three years.

Before the Chapter 11 filing in January, citing growing competition from rivals that expanded their reach over the years, the company had been contributing $100 million a year in pension costs. The new contract offer would've slashed that to $25 million a year, in addition to wage cuts and a 17% reduction in health benefits.

Tensions between management and workers were also an ongoing problem. Hostess came under fire this year after it was revealed that nearly a dozen executives received pay hikes of up to 80% even as the company was struggling last year. Although some of those executives later agree to reduced salaries, others - including the former CEO Brain Driscoll - had left the company by the time the pay hikes came to light.

Hostess filed a motion to liquidate Friday with U.S. Bankruptcy Court after it said striking workers across the country crippled its ability to maintain production. The shuttering means the loss of about 18,500 jobs. Hostess said employees at its 33 factories were sent home and operations suspended Friday. Its roughly 500 bakery outlet stores will stay open for several days to sell remaining products.

CEO Gregory Rayburn, who was hired as a restructuring expert, said Friday that the company booked about $2.5 billion in revenue a year, and that sales volume was flat to slightly down in recent years. So far this year, the company said Twinkies alone accounted for $68 million in sales.

The move to liquidate comes after thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike last week after rejecting the latest contract offer. The bakers union represents about 30% of the company's workforce. A representative for the bakers union did not return a call seeking comment.

Although many workers decided to cross picket lines this week, Hostess said it wasn't enough to keep operations at normal levels; three plants were closed earlier this week. Hostess CEO Gregory Rayburn said Hostess was already operating on thin margins and that the strike was a final blow.

"The strike impacted us in terms of cash flow. The plants were operating well below 50% capacity and customers were not getting products," he said.

The company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which this week urged the bakery union to hold a secret ballot on whether to continue striking.

Ken Hall, general secretary-treasurer for the Teamsters, said his union members decided to make concessions after hiring consultants who found the company's financials were in a dire situation.

"We believed there was a pathway for this company to return to profitability," Hall said

Although Hall agreed that it was unlikely anyone would buy the entire company, he said "people are going to look for some fire sale prices" for some of the brands.

"Frankly it's tragic, particularly at this this time of year with the holidays around the corner," Hall said, noting that his 6,700 members at Hostess were now out of a job.

Kenneth McGregor, a shipper for Hostess in East Windsor, Conn., arrived at the plant Friday morning and said he was told he was laid off immediately. He blamed the bakery workers union for rejecting a proposed contract.

In a statement on the company website, CEO Rayburn said there would be "severe limits" on the assistance the company could offer workers because of the bankruptcy. The liquidation hearing will go before a bankruptcy judge Monday afternoon; Rayburn said he's confident the judge will approve the motion.

So I wonder if the unions will accept any (not all, mind you) accountability for a company going out of business and their members now being out of jobs.

I think unions still have their place in some industries, and I even have some friends who are members of unions... but I still feel that they are a general drain on the economy by artificially inflating prices due to their demands on salaries, pensions, and healthcare Forcing companies and even customers to bend their way via strikes or sheer intimidation just doesn't make sense to me, unless it's a gross negligence on the employer's part.

I had a neighbor once that was in a union. He talked about how his union didn't get a contract with a local bank. He continued to tell me how they organized a picket line and totally disrupted business, didn't allow cusotmers to get to the bank, etc. Eventually, they got the contract. The sad part is that he seemed to be beaming with this aura of pride and accomplishment. I felt sorry for him that one, that's how they acquired work, and two, that you could be proud of yourself for being a menace like that.

Try being an Armstrong union worker that got screwed and put out on a lockout (no choice of the employees) just to get those to belittle the workers into thinking this had to be done to allow for the new contract. Which never got the new contract goin on 1.5 years now with out it!

The union boss's still have their jobs, I doubt they give much of a rats ass. They'll sit back and blame the evil greedy business.

The story is available.

The howling has already begun from the mad partisans on the right. Cries of ‘union thuggery’ are ringing out in the blogosphere, certainly to reverberate out into the mainstream conservative media.

For those who like a few facts before passing judgment, it seemed like a good idea to put together a few highlights from the almost decade long struggle to save the iconic brand.

First, this is the second bankruptcy the company is going through. The first one, in 2004, led to significant concessions from all employees, and a loss of several plants, outlets, and about a third of the workforce. Turns out, that wasn’t enough.

Enter the ‘venture’ capitalists.

During the first bankruptcy, the company actually fought off several attempts to buy the company, instead turning over equity to several equity firms, many of whom, ironically, get their money from large pension funds. They managed to emerge from bankruptcy in 2009. Then things started to go downhill.

The company filed again this year, 2012, and continued to operate with $75 million more from the equity firms. They installed Gregory Rayburn as Chief Restructuring Officer, with a compensation package of $1.5 million, plus cash incentives and a $1.95 million “long term compensation” package. Rayburn’s company also was paid $120k per month in ‘fees’.

It was also discovered that immediately prior to filing bankruptcy in 2012, Hostess executives received raises up to 80%, despite having promised that all employees, including management, would share in the concessions necessary to keep the company afloat..

Then the company wanted more concessions from its employees. The unions refused the concessions but agreed not to strike, as long as they weren’t forced into a contract. Hostess went to a judge and force the unions into a contract.

The entire time, Ripplewood, the major equity stakeholder, was charging the company a $3 million annual ‘management fee.’

The baker’s union, which is being blamed for the shut down, says that the latest offer from Hostess amounted to as much as a 32% reduction, on top of what they already conceded in the previous bankruptcy.

A route driver, who works 60 hour weeks, recently told the New York Post, “My take home pay for last week: $418.50. I was making $550. You’re a smart guy, you do the math.”

Yes it is
and they did it to themselves.
But lets not have facts get in the way.

Quote:

(WASHINGTON) – Today, the Teamsters Union announced its recommendation to the Bakery, Confectionary, Tobacco and Grain Millers International Union (BCTGM) that a vote of its Hostess members by secret ballot should be held to determine if the workers want to continue their strike of the company and force it into liquidation.

On Wednesday, Nov. 14, Hostess Brands indicated that if it couldn’t resume normal operations by 5 p.m. EST on Thursday, Nov. 15 that it would have to begin the liquidation process. Teamster Hostess members and all Hostess employees should know this is not an empty threat or a negotiating tactic, but the certain outcome if members of the BCTGM continue to strike. This is based on conversations with our financial experts, who, because the Teamsters were involved in the legal process, had access to financial information about the company.

As stated previously, Teamster Hostess members have been frustrated by numerous missteps by a variety of Hostess management teams, but the union has tried to engage constructively to find a solution to preserve jobs. That comprehensive engagement has spanned 18 months.

The Teamsters chose to challenge the company’s path of a worker-only solution, engage constructively so other constituents would be sacrificing and require management changes and oversight so that the same missteps would not be repeated.

In fact, when Hostess attempted to throw out its collective bargaining agreement with the Teamsters in court, the Teamsters fought back and won, ensuring that Hostess could not unilaterally make changes to working conditions during the several months’ long legal process that recently ended. Teamster Hostess members were allowed to decide their fate by voting on the final offer conducted by a secret mail ballot. More than two-thirds of Hostess Teamsters members voted with 53 percent voting to approve the final offer.

The BCTGM chose a different path, as is their prerogative, to not substantively look for a solution or engage in the process. BCTGM members were told there were better solutions than the final offer, although Judge Drain stated in his decision in bankruptcy court that no such solutions exist. Without complete information, BCTGM members voted by voice votes in union halls. The BCTGM reported that over 90 percent rejected the final offer and three of its units ratified the final offer.

On Friday, Nov. 9, the BCTGM began to strike at some Hostess production facilities without notice to the Teamsters despite assurances they would not proceed with job actions without contacting the Teamsters Union. This unannounced action put Teamster members in the difficult position of facing picket lines without knowing their right to honor such a line without being disciplined.

As is our longstanding tradition, Teamster members by and large are honoring Bakery Worker picket lines when encountered and complying with their contractual obligations when not encountering picket lines. The BCTGM leaders are putting Teamster members in a horrible position – asking them to support a strike that will put them out of a job when they haven’t even asked all their members to go on strike.